Business decisions, not technology issues, are the primary concerns of financial advisers when it comes to robo advice, according to Charles Schwab’s top digital executive.

“Advisers want to deliver the digital experience to their clients and achieve scalability for their firms,” Neesha Hathi, Schwab’s EVP for investor services platforms, strategy and client experience said in her keynote address at the annual SourceMedia In|Vest digital conference.

“The questions we’ve been getting from advisers are not so much about technology but more about how they can integrate the platform with their business and address issues like pricing models, service and branding,” Hathi elaborated in an interview with Financial Planning.

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One of the biggest concerns about automated advice services is how clients will react during unusually volatile markets.

ASSETS ON ROBO PLATFORM NOW OVER $7 BILLION

Launched one year ago, Schwab’s platform for advisers, Institutional Intelligent Portfolios, currently has over 550 advisers on its platform. The combined assets of Schwab’s institutional and retail robo platforms now exceed $7 billion, Hathi said in her keynote speech.

Nearly 60% of investors on the platforms are over 50, but 40% of new investors on the platform are under 40, she said. Average account size on the digital platforms is $90,000 Hathi said, and 42% of the robo clients have investable wealth of $250,000 or more.

“Advisers want to deliver the digital experience to their clients," Neesha Hathi, Schwab’s top digital executive said in her keynote address at the In|Vest digital conference.
“Advisers want to deliver the digital experience to their clients," Neesha Hathi, Schwab’s top digital executive said in her keynote address at the In|Vest digital conference.

One of the biggest concerns about automated advice services is how clients will react during unusually volatile markets. During one such period in January, call volume on Schwab’s digital platforms increased 30%, but only 1% of clients made changes to their portfolios, according to Hathi.

ROBOS ‘FUNDAMENTALLY CHANGING ROLE OF HUMANS’

She credited Schwab’s human advisers with creating a “tangible value” by reassuring clients and helping them stay the course.

What happened in January illustrates how automated investing is “fundamentally changing the role of humans in the delivery of wealth management,” Hathi told the In|Vest attendees.

Until now, advisers had to spend significant time on “mechanics” such as asset allocation, portfolio management, reporting and rebalancing, she explained in the interview.

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“Now advisers will be able to spend more time on the human aspects of their job, focusing on client needs and collaboration with their clients.”

“Now advisers will be able to spend more time on the human aspects of their job, focusing on client needs and collaboration with their clients,” Hathi said. “In other words they’re going to do the things that humans do best.”

MUTUAL FUNDS COMING

Hathi, a 12-year Schwab tech veteran who took over the job of overseeing Schwab’s robo platform in January after Naureen Hassan unexpectedly left to join Morgan Stanley as chief digital officer, said no big changes were in store for the platforms this year.

She did confirm, however, that Schwab is “working on” putting mutual funds alongside ETFs on the platforms.

Schwab will continue to charge advisers with less than $100 million in assets 10 basis points to be on the institutional platform, Hathi said, while firms with over $100 million in AUM will not be charged.

In her keynote speech, however, she cautioned that RIAs will have to “rethink how they charge for advice.”

For its retail platform, Schwab Intelligent Portfolios, the financial services giant will continue to “tweak the mobile experience” and try to broaden the platform’s capabilities “to get as many people on as possible," Hathi said.

Charles Paikert

Charles Paikert

Charles Paikert is a senior editor with Financial Planning, a SourceMedia publication.